HT Investigation: Flippers Find A Way (Sarasota, Bradenton: bank owned, for sale, real estate market)

[wondermint2]

As housing inventory flirts with historic lows, flippers have unmasked opportunities to financially benefit at the expense of recession-battered banks, competing real estate agents and the owner-occupiers ultimately forced to pay more for their slice of paradise.

HT investigation: Flippers find a way

[Shabotnik]

I don't like the Socialist tone of this article. This is the beautiful, efficient, marketplace of capitalism at work. Not only nothing to be ashamed of, but to be proud of. This is what makes this country great.

[SoFLGal]

Josh Salman at The Herald Tribune is a fantastic journalist and this story is no exception. He put a lot of time and research into it.

It is getting harder and harder to find homes for the flippers I represent and the profit margins are decreasing. Seems like everyone has gotten the memo that you can make some decent money, if you know what you're doing in the flipping world. Like Josh pointed out, many of the local flippers are real estate agents, builders, attorneys, etc.

I guess I wont comment much more then that since I have a "dog in this race", so to speak.

[imagardener]

Article quoting an agent whose offers have been losing out:
“Every time I track these sales, and each time, he has both sides of the deal, and his offers are $500 more than my investors’ offers. Coincidence? This has happened six times now in the last 12 months.”

So she's saying the listing agent is colluding with their buyers by giving them inside information so that their offer is always the highest and the listing agent gets the entire commission. The way to get around this is an online auction which I saw on several properties I looked at but did not bid on. Keeps everyone honest (well maybe).

I always wondered how a buyer could be sure their offer was even presented to the seller. In the case of a past property I know for sure the listing agent never presented the offer because when we got no response in 2 weeks I called the seller. I knew her name and phone number because we'd rented it the winter before for 2 months. She was p****d when I told her, said she never got our offer, it was accepted the next day. Did our broker report that agent, no.

[dpbarr2000]

The Herald Tribune (aka Pravda on the Gulf) is an utterly biased rag that was still calling the real estate market healthy as it crashed.

As far as Josh Salman being an "excellent reporter", it's not hard to log into the tax assessor's website and regurgitate data from it into what is supposedly a "column".

[Sunshine Rules]

According to a 2013 RealtyTrac home flipping report, the Sarasota - Bradenton - North Port area ranked 9th in the list of 25 most profitable cities in the country for real estate flippers to make a profit. Between 2011 and 2013 when the report was compiled, Sarasota had a 79% increase in single family home flips, at an average gross profit of $40,200 per flip.

Flippers obviously preferred the easy hanging fruit on the tree, distress sales -- short sales and REOs (Real Estate Owned, i.e. bank owned). Over time the lenders became savvy on the short sales and started requiring all parties to the transaction plus all real estate agents involved to sign an arms length affidavit. That helped cut down on many (but not all) of the cozy relationships as all parties who sign the affidavits become liable for their negligent or intentional misrepresentations.

However, REO sales are another story. REO sales generally involve asset managers who's main concerns are meeting monthly or quarterly sales goals, listing agents who know there is little oversight on their actions as long as they produce results, and buyers/buyer agents who never get to speak with the asset manager or anyone on the seller side. As a result, this scenario can (and does) create an opportunity for fraud among real estate brokers with lesser scruples.



There are, I think, 2 very important paragraphs in the article:

(1) Of the properties flipped within a month, almost half were insider deals driven by real estate agents, attorneys or mortgage brokers. The activity involved many of the same investors who played a central role in the flipping bonanza almost a decade ago, including the partner of a businessman now serving time in prison for flipping fraud.

(2) Many of the lenders that survived the financial collapse are allowing substantial revenue from delinquent mortgages to once again slip away. Local short sales that were flipped within a month since the start of 2014 have shortchanged federally insured banks out of nearly $2 million. That figure jumps to $8.5 million for short sales flipped within 90 days.

There's a theme here -- the same people who were involved in various forms of fraud during the real estate boom years are still up to the same old tricks. And why shouldn't they? After all, they were not held accountable for their actions the last time around, so why should they think they will be held accountable this time around for the same type of actions?

During the Savings & Loan scandal of the 1980's, hundreds of high level bank executives were convicted of crimes. But bank executives got a pass this time around because the government has not made any concerted effort to prosecute any high level bank employees for their actions. By the way, I read an article that stated the most recent banking scandal of the mid 2000's was 70 times larger in scope than the S&L scandal of the 1980's.



As long as REO listing agents are allowed to submit buyer offers on their agency's listing, the potential for abuse will exist. Many REO listing agents in our area also work with investors who have expectations they want met.

Banks could avoid much of the conflict by either requiring listing agents to act only as single agents for the seller, i.e. no one from the listing office (including the listing agent) could bring buyers to those REO listings
or
by having all bids on the REO listings submitted to an online site where the listing agents do not have access to manipulate bidding. This would be something similar to Fannie Mae's homepath bidding process in which the buyers agents submit the offers online, the listing agents are left out of the bidding loop.



There will ALWAYS be people who try to take advantage of the system, any system. Buyers, sellers, agents, BANKS. I think, deep down, the real problem is that our society no longer emphasizes values and taking responsibility (i.e. taking the high road), or showing integrity, principals and ethics.


Just because something is legal doesn't mean it's ethical, moral or fair. Just because you CAN get away with something doesn't mean you SHOULD.

[Skyeclad]

Originally Posted by Shabotnik

I don't like the Socialist tone of this article. This is the beautiful, efficient, marketplace of capitalism at work. Not only nothing to be ashamed of, but to be proud of. This is what makes this country great.

Are you kidding? Is you brand of capitalism a system that is rigged with insiders who may be committing fraud?

[CTC]

Most of this is good IMO-we have a home in NP, bought in 2011 in a distressed neighborhood. Since the flipping has begun-the neighborhood is 100% better. Places are getting fixed up-and they are getting sold, or if not sold, rented to people who actually take care of them.

[SoFLGal]

Originally Posted by CTC

Most of this is good IMO-we have a home in NP, bought in 2011 in a distressed neighborhood. Since the flipping has begun-the neighborhood is 100% better. Places are getting fixed up-and they are getting sold, or if not sold, rented to people who actually take care of them.

I agree with this. Like most businesses there are the shady people or the people who try to push the envelope. As a whole I think the people who flip homes are decent people and it's a positive thing for the community. Many of these homes have sat empty for years with unpaid taxes and code violations. The flippers clean the homes up, pay the back taxes and employ local tradesmen. There is a positive side to flipping.

[Sunshine Rules]

Originally Posted by CTC

Most of this is good IMO-we have a home in NP, bought in 2011 in a distressed neighborhood. Since the flipping has begun-the neighborhood is 100% better. Places are getting fixed up-and they are getting sold, or if not sold, rented to people who actually take care of them.

My concerns are not about flippers in general. Flippers routinely take homes in need of repair and rehab them, put them back on the market where they are purchased by those who do not have the ability to rehab homes on their own.

My concern is about REO listing agents and investors/flippers who engage in various forms of bid rigging or bid manipulation in order to procure properties for the favored investors.

If you go back and read the article, one agent in particular complained about a listing broker who's investors had managed to outbid her investors on a number of properties by $500 each time:

“This agent lists these (distressed homes) for sale, and every time I submit an offer, he replies a day later that there is already another offer on it that the bank has accepted,” the agent posted on the real estate Facebook group. “Every time I track these sales, and each time, he has both sides of the deal, and his offers are $500 more than my investors’ offers. Coincidence? This has happened six times now in the last 12 months.”

I personally have also heard from agents who have concerns that not all bids are being forwarded to the banks by the listing agents.


As I mentioned in my previous post, I think there are some fairly simple changes that could be implemented if the banks chose to do so that would eliminate much of the "insider" bid manipulations.